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Is the future of the CE marking’s regulatory system in danger?

Last week, this blogpost of the good folks at European Law Blog was brought to our attention. In a well written article, Megi Medzmariashvili informs us about an interesting case that will be brought to the European Court of Justice soon. This ‘James Elliot Construction case’ concerns the interpretation of the practice of ‘attaching’ harmonised standards to European directives and regulations. This practice is a specific feature of the CE marking directives and the EU’s regulatory approach called the New Legislative Framework.

If the European Court of Justice will follow the opinion of the Attorney General in this case, this could lead to end of one of the corner stones of the CE marking system: the referring to standards developed by private standardisation bodies. It also potentially endangers the European standardisation’s financial model and it could bring an end to the protection of harmonised standard’s copyrights. We’ll be following the developments in this case with great interest!

We thank European Law Blog and Megi Medzmariashvili for allowing us to repost their blog post here:

Opening the ECJ’s Door to Harmonised European Standards? (Opinion of the AG in C-613/14 James Elliott Construction)

By Megi Medzmariashvili

The James Elliott Construction case brings before the Court of Justice (ECJ), for the first time, the issue of whether it is within the Court’s jurisdiction to give preliminary rulings on harmonised technical standards (HSs). This contribution will analyse Advocate General (AG) Campos Sánchez-Bordona’s Opinion in this case, in particular its potential effects on the legal status and copyright protection of HSs. It will also discuss, more generally, the legality of the delegation of rule-making powers to the European Standard Bodies (ESBs). If the Court follows the AG’s opinion it will most certainly craft a New Approach to the New Approach.

Background: The New Approach to Technical Harmonisation and Standardisation

The James Elliott construction case concerns the interpretation of an HS attached to a directive applying the so-called ‘New Approach’ technique to harmonisation. The New Approach strategy, adopted in 1985, concerns the harmonisation of technical requirements by means of adopting HSs for products. Under this strategy, private bodies, European Standard Bodies (ESBs), exercise important rule-making powers. On the basis of a mandate from the Commission, one of the ESBs draws up and adopts an HS that sets out the ways to comply with the essential requirements laid down by directives. The Commission subsequently publishes the reference to the HS in the official journal. It is only at this point in time that the HS acquires presumption of conformity, meaning that an economic operator following the HS is presumed to be in compliance with a New Approach directive.

The practice of referring to standards has grown immensely following the introduction of the New Approach strategy. The increased reliance of the EU legislator on the ESBs poses the constitutional difficulties concerning the delegation of rule-making powers to private bodies. It also raises an important question of to what extent the technical rules i.e. the HSs are the part of EU acquis.

The Facts

The case concerns a dispute between two parties involving an interpretation of an HS adopted by CEN pursuant to the Commission’s mandate. The Irish Supreme Court making a reference is interested in whether a preliminary ruling on the interpretation of an HS could be given and if so, requests an interpretation of the HS.

The Opinion of the Advocate General

By virtue of Article 267 TFEU the ECJ has jurisdiction to interpret the acts of the institutions, bodies and offices of the Union. Consequently, a preliminary ruling on the interpretation of HSs can be given only if HSs form part of the Union acquis. This, in its turn, requires ruling on the legal nature of HSs-the issue which has not been decided by the Court until now.

In the case at hand, the AG argued that HSs are part of EU law and advised the Court to give a preliminary ruling. To support this finding he provided three reasons. Firstly, the Court has jurisdiction to interpret HSs because they are connected to a Directive. Consequently, if the Court has jurisdiction to interpret a directive, it must also have a right to give the preliminary ruling on HSs. Otherwise, divergent interpretation of HS in various Member States would undermine the effectiveness of the New Approach directives. (para. 44)

Secondly, the system of requesting the adoption of HSs is result of ‘controlled legislative delegation in favour of a private standardisation body.’ (para. 55) This is because the Commission exercises significant control over the procedure of drafting HSs. Particularly, HSs are adopted pursuant of the Commission’s mandate. Also, the Commission connects a standard to a relevant directive by publishing the reference to an HS in the official journal. This yields the result that the goods manufactured in compliance with HSs can move freely throughout the Union.

Thirdly, the actions of CEN concerning the adoption of HSs is financed by Union and governed by EU Law. Moreover, the activities of a standardisation body despite their private nature, fall within the scope of EU law as demonstrated by the Fra.bo case. In the latter case, the Court did not hesitate to rule on the compatibility of the activities of the national standardisation body connected to national legislation with the free movement rules. Then, a fortiori, the Court must have jurisdiction to interpret a standard which is connected to the Directive.

Some Remarks

The AG is right in finding that the Commission exercises significant control over HSs. This is because the ESBs write an HS in light of the Commission’s mandate. Moreover, the standard becomes connected to a directive due to the Commission’s publication of a reference to an HS in the Official Journal. Without it, ‘the goods meeting such standard will enjoy neither presumption of compliance nor freedom of movement’ (para 49). Furthermore, the act of publication implies a prior assessment of the compatibility of HSs with the mandate and essential requirements.

The AG’s reasoning reflects the changes introduced by the Regulation 1025/2012 providing legal significance to a publication. The Commission’s decision to publish a reference to an HS is an act of recognition of a private standard and this decision is susceptible to judicial review under Article 263 TFEU.

On a different note, surprisingly, the AG did not discuss the private nature of standards nor their voluntary status. However, appeal to the voluntariness and private nature of standards usually provided an escape route from the law. What can be extrapolated from the AG’s opinion on these matters is that since HSs are connected to the Directive, they are not purely private acts. In addition, the legal effect that an HS entails, such as granting the right to free movement to companies complying with standards, is sufficient to argue that they are legal acts for purposes of Article 267 TFEU.

The Wider Consequences of the Opinion

This Opinion might have several important consequences for the New Approach strategy if it is followed by the Court. Firstly, it revives the discussion concerning the unlawful delegation of rulemaking powers to the ESBs. This is so because, according to the AG, adopting an HS on the basis of a mandate constitutes a controlled delegation from the Commission. It is interesting to note that the AG uses the word ‘delegation’ only in connection with the word ‘controlled’. This is a conscious choice to make the New Approach strategy compatible with the Court’s case law.

In the Meroni case, the lack of administrative and judicial control was an important factor prohibiting the delegation of rule-making powers. Moreover, in the rather recent ESMA case, the Court ‘mellowed’ the Meroni doctrine and allowed the delegation of discretionary powers as long as this was followed by judicial control. This means that the mechanism of legal accountability—the judicial review—can justify the delegation of discretionary powers. Hence, in the light of the ESMA reasoning, the delegation of rule-making powers to the ESBs can be considered lawful, only if it is a case of controlled delegation.

This Opinion might also have an important consequence for the copyright protection of HSs. Although the AG avoids this matter, not taking it to be essential for the reference at hand, he admits that the principle that legislation should be published ‘would have a very significant impact on the European standardisation system’ (para 51).

As it stands now, the ESBs hold copyright on HSs and get revenue by selling them. The rationale behind this is that standards, like books, films or musical compositions are works of authorship and hence protected by copyright. However, the Advocate General considered standards to be acts of institutions, bodies and agencies of the EU. If so, then HSs should be publicly accessible, because in the EU, public access to all official documents of EU institutions, bodies and agencies is an accepted principle enshrined in Article 15 TFEU.

The copyright protection of standards referred in legislation has led to variation in the case-law in certain Member States. However, it is clear that as a general rule and according to the basic principle of democracy, laws should be accessible free of charge. This means that an HS—an act of the EU can have legal effect only if it is accessible free of charge and after its publication.

As a last point, delivering preliminary rulings on the HSs might undermine the effectiveness of the New Approach directives, since it opens the possibility for each and every manufacturer to challenge each and every standard. Moreover, it requires the Court to be ready to interpret complex technical issues, which may not always be as simple as it is in the case at hand, where the Court just needs to establish whether the HS fixes a maximum limit of 1% sulfur content for aggregates.

To conclude, if the Court follows the AG’s Opinion, it is clear that this case in tandem with the Fra.bo judgment and in addition to Regulation 1025/2012 will break down the private and voluntary frame of EU standardisation. Opening the ECJ’s door to HSs can be a positive development, despite the pitfall of undermining the effectiveness of the New Approach directives. That is because subjecting HSs to judicial control is a good opportunity to provide a mechanism of legal accountability for EU standardisation.